Accounting 2 unit 1 test

A business entity that is legally separate and distinct from its owners is called a: A. corporation. B. sole proprietorship. C. partnership. D. service company.

A

Unlimited life is a characteristic of which type of business entity? A. Corporation B. Sole proprietorship C. Partnership D. Merchandiser

A

A business owned by one person whose personal possessions are at risk if the business fails is called a: A. partnership. B. sole proprietorship. C. corporation. D. merchandiser.

B

The accounting concept requiring that the profits of a business be determined at regular intervals throughout the life of the business is the: A) business entity concept. B) going concern concept. C) monetary unit concept. D) periodicity concept.

D

Financial accounting standards that define what constitutes acceptable accounting practice for financial reporting worldwide are referred to as: A) SFAS. B) FASB. C) IFRS. D) GAAP.

c

A jet ski manufacturer pays $6,000 for six months insurance. This is an example of a(n): A) operating activity. B) investing activity. C) financing activity. D) planning activity.

A

The business function designed to determine the wants and needs of consumers is referred to as: A) marketing. B) finance. C) human resources. D) operations.

A

A burger shop requires employees to ring up sales and place all cash receipts in the cash register. This is an application of which of the following internal controls? A) Requiring proper authorization B) Separating incompatible duties C) Physically controlling assets and documents D) Maintaining adequate documents and records

C

Which type of business is required to pay taxes on income earned? A. Sole proprietorship B. Corporation C. Partnership D. Manufacturer

B

A bookcase manufacturer purchases brackets to install on the bookcases in production. This is an example of a(n): A) financing activity. B) investing activity. C) planning activity. D) operating activity.

D

When a company operates in a more certain environment, it tends to focus inward and have a(an) A) flexible strategy. B) rigid strategy. C) loose strategy. D) efficiency strategy.

D

Limited liability is an attribute of which type of business entity? a. Partnership b. Sole proprietorship c. Service company d. Corporation

D

The Report of the Independent Auditor is the opinion of the CPA firm that examined the financial statements of a company and states which of the following? A) The financial statements are correct as reported. B) The financial statements are fairly presented. C) The financial statements are free from fraud. D) The financial statements are presented fairly in accordance with GAAP.

D

The bookkeeper who records cash receipts also deposits daily cash receipts at the bank on his way home from work. This is a violation of which of the following characteristics of good internal control? A) Requiring proper authorization B) Maintaining adequate documents and records C) Physically controlling assets and documents D) Separating incompatible duties

D

The function of business responsible for providing the information used by other functional areas to perform their jobs is referred to as: A) production and operations. B) human resources. C) marketing. D) accounting and information systems.

D

Which of the following best describes the type of business John Deere Inc. is? A. Manufacturing B. Manufacturing and Service C. Manufacturing and Merchandising D. Manufacturing, Service, and Merchandising

D

Which of the following combination of quality measurement cost are incurred voluntarily? A) Prevention cost and external failure cost B) Appraisal cost and internal failure cost C) External failure cost and internal failure cost D) Prevention cost and appraisal cost

D

Which of the following measures the liquidity of a company? A) Return on Owners' Equity B) Gross Margin Ratio C) Return on Investment D) Quick Ratio

D

Which of the following is considered value added time? A) Order response time B) Production time C) Queue time D) Shipping time

B

Which of the following explains why it is relatively easy for corporations to raise large amounts of money? A) Owners have unlimited liability for the debts of the business. B) Day-to-day operations are closely supervised by owners. C) Corporations raise capital by seeking relatively small amounts from many people. D) Corporations are not subject to as much regulation as partnerships and sole proprietorships.

C

Which of the following has limited liability for all owners and is not subject to double taxation? A. Corporation B. Sole Proprietorship C. Limited Liability Corporation D. Limited Partnership

C

A law firm signs a $700,000 mortgage note with a local bank for the purchase of an office building. This is an example of a(n) A) financing activity. B) planning activity. C) operating activity. D) investing activity.

A

IFRS are produced by: A) International Accounting Standards Board. B) Securities and Exchange Commission. C) Financial Accounting Standards Board. D) International Accounting Committee.

A

Identify the ratio below that does not monitor nonvalue -added time. A) Quick Ratio B) Inventory Turnover C) Accounts Payable Turnover D) Accounts Receivable Turnover

A

Activities involving obtaining necessary funds to purchase long-term assets, repay existing obligations, and provide a return for owners are referred to as A) financing activities. B) operating activities. C) investing activities. D) planning activities.

A

All the checks used by Graphics, Inc. to pay its bills are prenumbered. This is an application of which of the following internal controls? A) Maintaining adequate documents and records B) Physically controlling assets and documents C) Requiring proper authorization D) Separating incompatible duties

A

On a bank reconciliation, which of the following will reduce the bank's cash balance? A) Outstanding checks B) Deposit in transit C) Nonsufficient funds check D) Failure of the company to record the correct amount of the check on the company's records.

A

The owner of a dry cleaning business maintains separate checkbooks for his business and his personal affairs. This best describes an application of the: A. business entity concept. B. going concern concept. C. monetary unit concept. D. periodicity concept

A

A fitness center repays $10,000 it borrowed from the bank to purchase an exercise machine. This is an example of a(n) A) investing activity. B) financing activity. C) operating activity. D) planning activity.

B

An law firm purchases a $100,000 computer system for its accounting department. This is an example of a(n) A) financing activity. B) investing activity. C) operating activity. D) planning activity.

B

Which of the following business organizations has general partner(s) and limited partners that have limited liability? A. Limited Liability Company B. Limited Partnership C. Limited Corporate Partnership D. S Corporation

B

The profitability generated by the net assets (assets-liability) of a corporation would be best measured by the: A) Quick Ratio. B) Return on Investment. C) Return on Owners' Equity. D) Gross Margin Ratio.

C

Which of the following is not a cause for the number of partnerships to be relatively small? A) Unlimited liability B) Mutual agency (each partner can act for other partners) C) Double taxation D) Difficulty of formation

D

Which of the following is not an example of a task performed by someone in the finance function? A) Selecting projects for the firm to invest in B) Deciding between debt and equity financing of an acquisition C) Deciding when to raise new capital D) Determining the percentage of defective products

D

Which of the following is not an objective of financial reporting specified in Concepts Statement No. 1? (A To provide information useful to investors and creditors (B To provide information helpful in assessing the future . amounts and timing of cash (C flows (D To provide information about the assets and claims on the . assets of a firm (E To prepare income statements on a timely basis

D

Which of the following is the ratio for calculating the return on sales ratio? A) Net Income/Total Stockholders' Equity B) Current Assets/Total Sales C) Current Liabilities/Total Sales D) Net Income/Total Sales

D

Which of the following ratios measures the profitability of the money invested in the firm's assets? A) Quick Ratio B) Return on Owners' Equity C) Gross Margin Ratio D) Return on Investment

D

Which of the following will required the cash on the books of the company to be adjusted? A) Outstanding checks B) Deposits in transit C) Bank errors D) Bank service charges

D

IFRS stands for: A. International Financial Reporting System. B. International Financial Reporting Standard. C. International Financing Requirement Standard. D. International Financing Regulation and Standards.

B

Investors read the Independent Auditors' Opinion because: A) they want to know if financial statements are mathematically correct. B) they want some assurance that the financial statements are fairly presented. C) they want to determine if the auditors found any fraud. D) they want to know if the auditor thinks the company is a good investment.

B

Which of the following is part of the operating process? A) Sale of a warehouse B) Purchase of machinery C) Purchase of inventory D) Sale of common stock of another firm

C

The balanced scorecard approach has four perspectives, which of the following is not one of those perspectives? A) Financial perspective B) Learning and growth perspective C) Internal control perspective D) Customer perspective

C

The owners of a pizzeria invest $90,000 into the business for expansion purposes. This is an example of a(n) A) operating activity. B) investing activity. C) planning activity. D) financing activity

D

Which of the following is an example of a liability? A) An amount that must be paid to a business that sold you some supplies B) The obligation to transfer the net assets of the business to its owners C) Equipment purchased by the business on a long-term payment plan D) The amount contributed to the business by your partner

A

Which of the following is not a correct relationship? Production Function—Determine Cost of Products Manufactured Marketing Function—Advertising Finance Function—Borrow Cash Human Resource Function—Lay Off Employees All are a correct relationship

A

Morland Corp purchased a building that will house its new manufacturing plant. This is part of Morland's A) operating activities. B) investing activities. C) financing activities. D) planning activities.

B

Net income is found on which of the following two statements? A) Balance Sheet and Income Statement B) Statement of Changes in Stockholders' Equity and Income Statement C) Statement of Changes in Stockholders' Equity and Balance Sheet D) Statement of Cash Flows and Balance Sheet

B

Which of the following is an objective of financial reporting specified in Concepts Statement No. 1? A. To provide information useful to investors and creditors B. To provide a statement of cash flows C. To provide a balance sheet at the end of a year D. To prepare income statements on a timely basis

D

Which of the following would best describe the type of business Disney operates? A. Service B. Service and Manufacturing C. Service and Merchandising D. Service, Merchandising, and Manufacturing

D

Which of the following statements about the use of accounting information by the human resources function is false? A) People in human resources do not use accounting information; they leave all of that to their accountants. B) Those in human resources use accounting information to figure employees' pay. C) The computation of retirement benefits is a human resource function requiring accounting information. D) Accounting information is needed to evaluate employees' performance.

A

Riga Corp borrowed $1,000,000 to buy a new manufacturing plant is part of their A. operating activities. B. financing activities. C. investing activities. D. planning activities.

B

A business owned by two or more individuals whose personal possessions are at risk if the business fails is called a: A. sole proprietorship. B. corporation. C. partnership. D. manufacturer.

C

Which of the following will not require an adjustment to the company's cash balance? A) Bank service charge B) Nonsufficient funds check C) Bank recorded a check for the wrong amount D) All will require the company's cash balance to be adjusted.

C

Chili Willi, a restaurant serving southwestern cuisine, purchases a new chili pot for $25,000. This is an example of a(n) A) financing activity. B) operating activity. C) planning activity. D) investing activity.

D

Which of the following is not subject to double taxation? A. Limited Liability Company B. S Corporation C. Limited Liability Partnership D. Limited Partnership E. All of the above are not subject to double taxation.

E

Which of the following is not considered a subprocess of the operating process? A) Conversion B) Performance C) Marketing/sales/collection/customer service D) Purchasing/human resources/payment

B

The Capital Resources Process features which of the following pairs of activities? A) Operating and investing activities B) Financing and investing activities C) Reporting and operating activities D) Financing and planning activities

B

The cash held by a company at the end of the year is found on which of the following two statements? A) Balance Sheet and Income Statement B) Balance Sheet and Statement of Cash Flows C) Income Statement and Statement of Cash Flows D) Statement of Stockholders' Equity and Cash Flows Statement

B

Identify the item below that is considered nonvalue -added time. A) Time it takes for customer to order goods B) Time it takes to process an order C) Time it takes to ship the order D) All of the above are nonvalue -added time

D

Which of the following is the ratio for calculating the current ratio? A) Current Assets/Current Liabilities B) Current Assets/Total Liabilities C) Current Liabilities/Current Assets D) Current Assets/Total Sales

A

The We Build Anything Construction Company recently completed the construction of an office building that took 14 months to complete. Following the completion of this project, the company began construction of a shopping center that took 15 months to complete. The company's financial statements were not prepared at the end of each of these projects but at the end of the fiscal year. This best describes an application of the: A. business entity concept. b. periodicity concept. c. monetary unit concept. d. going concern concept.

B

The organization responsible for setting U.S. external financial reporting practice is the: A. Securities and Exchange Commission. B. Financial Accounting Standards Board. C. Federal Government. D. American Institute of Certified Public Accountants.

B

The owner of XYZ Corporation includes his personal liabilities with business liabilities. What accounting concept is being violated? A) Going concern B) Business entity C) Monetary unit D) Periodicity

B

Which of the following is a characteristic of the corporate form of business? A) Mutual agency B) Separate legal entity C) Relatively easy to form D) Owners have unlimited liability for the debts of the business.

B

Which of the following is an external stakeholder in a supermarket? A. The manager of the produce department B. The company that supplies the baked goods for the bakery C. The cashier at the checkout counter D. The chief financial officer at the supermarket's corporate headquarters

B

Which of the following is not a liability from accounting purposes? A) An amount that must be paid to a business that sold you some supplies. B) You promise to increase wages in the coming year by $1 per hour. C) You borrow $100,000 to buy a new piece of equipment. D) Your workers have worked all week and you will pay them next Wednesday.

B

Limited liability means: A. A company is only liable for an amount that is established by a preset limit. B. Creditors are limited to just the cash available in the company at the time of the loss. C. Creditors of a company can only claim the assets of the firm and not the assets of the owners of the firm. D. Creditors of a firm can claim all the assets of a company but only a limited amount of the owner's personal assets.

C

The Balanced Scorecard Approach is part of which of the following processes? A) Operating process B) Capital resources process C) Performance measurement and management process D) Business organization and strategy process

C

The Gross Margin Ratio measures which of the following? A) The profitability of the firm's debt B) The liquidity of the firm's profit C) The percent of each dollar of sales that can cover the firm's operating expenses D) The percent of the assets that generate profit for the firm and that covers operating and financing expenses

C

The business function that is responsible for managing a company's capital resources is referred to as: A) marketing. B) human resources. C) finance. D) operations.

C

The current liquidity of a company is measured by which of the following? A) Return on Sales Ratio B) Return on Assets Ratio C) Current Ratio D) Debt to Equity Ratio

C

Which of the following are the three phases of a business? A) Start-up, development and decline B) Operating, investing and financing C) Planning, performing and evaluating D) Revenue, expenditure and conversion

C

Which of the following bank reconciliation items would require the cash on the company's books to be reduced? A) Outstanding checks B) Deposit in transit C) Nonsufficient funds check D) Bank error

C

Which of the following is not one of the financial statements required for external reporting today? A) Income Statement B) Balance Sheet C) Statement of Changes in Working Capital D) Statement of Changes in Stockholders' Equity

C

Which of the following is not one of the four business processes? A) Performance measurement and management process B) Capital resources process C) Internal control process D) Business organization and strategy process

C

Which of the following statements about the use of accounting information by the marketing function is false? A) People in the marketing function use accounting information to help figure selling prices. B) Accounting information would be needed to appraise different ways of getting the product to customers. C) Those in the marketing function do not use accounting information; they leave all of that to their accountants. D) Accounting information is needed for product-selection decisions.

C

The statements of financial accounting standards, and other authoritative pronouncements that define what constitutes acceptable accounting practice for financial reporting are collectively referred to as: A) SFAS. B) FASB. C) SEC. D) GAAP.

D

What distinguishes partnerships from sole proprietorships? A) Involvement in day-to-day business activities by owners B) The extent of liability for the debts of the business C) The amount of income tax the entity has to pay D) Mutual agency (each partner can act for other partners)

D